CDs (Certificates of Deposit) Reviews

CDs (Certificates of Deposit) Reviews A certificate of deposit or share certificate is a type of investment and savings product available to account holders at banks, credit unions and other financial institutions. A CD is also referred to as a "timed deposit" because you agree to invest your money without withdrawing it for a particular length of time.

A CD can help you achieve financial stability and security. The money that you earn from it can help you pay for big life event purchases like a new car, house, education or wedding, an emergency, retirement plans and funeral arrangements.

Our Certificate of Deposit Reviews

As with any investment, it is important to perform extensive research before making your final decision. Our website provides visitors with access to an incredible level of detailed information about financial institutions and certificate of deposit product options. Each review is written by someone who has already taken these steps. Our reviewers come from a wide range of backgrounds and geographic regions. As a result, you are guaranteed reviews that approach this topic from different perspectives. We have also developed a format where reviewers provide precise ratings related to interest, fees, satisfaction and service and supply summary-style stories about their good and bad experiences.

Things to Consider While Researching

You must do more than simply read our reviews. It is equally important that you educate yourself as much as possible about different financial institutions, the pros and cons of certificate of deposit products and your responsibilities. The following sections provide a guide to important topics that you should keep in mind as you research:

Basic DetailsCDs are not inflexible products with little room for negotiation at sign up or changes in how you grow your money while they mature. Flexible options do exist. CD maturity periods can range from one month to five or more years. You can choose a "small" CD that only requires a minimum deposit of $100 up to less than $50,000 or $100,000, as dictated by the financial institution. You can also select a "large" CD, also known as a "Jumbo" or "High Yield" product, that requires an investment of $100,000 or higher.

Interest RatesWith a CD, a financial institution pays you interest for the privilege of using your invested money during the agreed upon maturity period. Typically, a CD has a fixed interest rate, but some institutions also offer variable rate products. CD interest is expressed as an Annual Percentage Yield based on the rate and the compounded interest period. Depositors often receive a "locked-in" percentage rate that can range between less than one percent to more than 4 percent. You can expect a higher interest rate on large CDs than on small ones because you provide the financial institution with access to your money for a longer period. The rate amount only changes during the CD maturity period under certain conditions.

Standard FeesWhen you open an account with a financial institution, the representative might insist on charging you an unnecessary administrative, processing or maintenance fee. Some institutions charge a fee to raise the rate or extend the maturity period on products that provide these features. One type of fee that you must take the time to review cautiously is the "early withdrawal penalty" or "surrender charge," which punishes you for requesting a withdrawal of the principal balance before the CD matures by charging a penalty that is usually equal to several months of interest as based on a penalty schedule. Lastly, your beneficiary might face a fee for early withdrawal if you become incapacitated or pass away.

Liquid CDsOne way that you can bypass or reduce the early withdrawal fee is with a special flexible CD product known as a "liquid," "no penalty" or "low penalty" CD. With this type of product, you earn less from interest but you then have the option to make one or more withdrawals every month or quarter based on a maximum number of permitted withdrawals. You must wait at least seven days after you deposit the funds to make a withdrawal, and you must usually maintain a minimum balance.

Bump CDsAnother flexible option that can get you a better APY deal is the "raise your rate" CD, which is also known as the "rising rate," "bump up" and "opt up" CD. This type of certificate of deposit product allows you to ask for a higher rate one or more times for the remainder of the period before the CD matures. The new rate is usually based on rates for current products at that particular financial institution. Some financial institutions allow depositors to increase their CD rate only once during the term and some allow it every three months.

Callable CDsThis product looks like a fantastic investment at first glance, but it can actually cause financial instability and reinvestment difficulties. A "callable" CD has a high interest rate of usually five percent or more during the maturity period. In exchange for this higher rate, you accept the risk that the financial institution might break your agreement and give you back the principal investment plus any earned interest up to that moment before the maturity period ends. On one hand, you get the guarantee of an incredibly high rate until the "call date." On the other hand, you can't depend upon this CD as a long-term investment with a specific product maturity dollar amount goal in mind because market rates can drop below your current rate to a point that convinces the financial institution to cancel your agreement and take out a loan instead to use for their purposes. If that happens, you might find yourself unable to reinvest immediately at a similar or higher rate.

CD LadderingInstead of relying on one CD like a bump up or callable product, consider creating a tier of CD products to protect your investment. For example, instead of investing $10,000 in one CD that matures over five or ten years, break your investment into smaller amounts across several CDs that have different short-term and long-term maturity dates. Consider breaking the money into five $2,000 CDs or 10 $1,000 CDs. Set up two or three of them at five year maturity periods and the rest at one year. As one short-term CD matures, you can then use it or re-invest it without having to worry that you spent too much of your savings or made your cash inaccessible for years. With a CD ladder, you always have access to cash while also having one or more CDs earning interest. This process works well if you think that rates are going to increase within a year because you can then re-invest the principal and interest in a product with a higher rate.

Negotiation OpportunitiesAs already mentioned, you can negotiate a better interest rate by investing a lot of money. If you have one or more accounts with a trusted bank or credit union, you should also look for a special preferred customer, bundled product or premium rate deal. If you have the option to join a local credit union, keep in mind that a credit union can offer fantastic interest options to you because credit unions are member-owned. Some financial institutions offer special "sign up bonus" CD deals with high interest rates to attract new customers who they hope to retain in long-term relationships.

CD InsuranceWhen you review CD products, always make certain that your investment is insured through the financial institution via the Federal Deposit Insurance Corporation, the National Credit Union Administration or a private insurer. The FDIC covers bank certificate of deposits worth up to $250,000 and the NCUA covers the same amount for credit union equivalent share certificates. If a financial institution fails to offer insurance, then you should go with someone else.

Automatic RenewalMany financial institutions automatically renew CD agreements. Always watch out for this practice as it can lead to a reinvestment nightmare since the new CD might involve a lower interest deal that causes you to lose money and/or blocks access to your money without penalty by taking a lot longer to mature. Thankfully, any financial institution must send you a letter that outlines the exact maturity date near the end of the maturity period. Since changes of address, identity theft and other life events can disrupt postal service delivery, it is important that you know whether the bank or credit union CD product that you ultimately choose features automatic renewal.

Account ServicesYou also need to look beyond the CD product to the other types of account services that the bank or credit union offers depositors, including online banking tools and emergency customer service access options. Any financial institution should provide you with a highly encrypted online account that has a modern, user-friendly interface that works well with both desktop- and mobile-style devices. You should also choose an institution that has kind and knowledgeable customer service representatives who are available at reasonable business hours. The bank or credit union should also have an emergency help line that is always available even on weekends and during major holidays since you might need to perform an early withdrawal at any time.

Additional Important Tips About CDs

We know that investments of any sort can make depositors feel overwhelmed with information. Yet, the above tips are the types of things that every investor should know before choosing a CD product. Additionally, always check for complaints filed by consumers on our website, through state regulators and elsewhere before you make a decision. If you need to make money in the short term, compare individual CDs and laddering options to savings account options since some savings account products offer better short-term deals.

Only choose early withdrawal if you think you can benefit more by removing the money before the maturity date because you can offset the penalty with a new reinvestment rate or the money can help with a project or emergency that has long-term value. If the early withdrawal penalty threatens to reduce your principal at all and you need cash fast, try another option like a points or cash back credit card, personal loan or home equity line of credit.

You can make a callable CD work for you. Since all financial institutions do provide a call date that marks the point after which they can cancel the agreement at any time, you can estimate the amount of money you should earn until that date. If that total works for you as a short-term investment that you might have to wait to withdraw, then agree to the callable CD and consider any interest earned after that date as a "bonus."

Many online financial institutions offer higher rates, but make up the difference with unnecessary fees or a higher than usual surrender charge. Representatives of both online and offline financial institutions sometimes try to trick consumers who invest in rising rate CD products by setting up deals that are nearly impossible to fulfill. For example, you might be told that you can increase the rate one time in the future if a similar product's rate goes up and then the financial institution changes its products enough so that no similar product exists when you want to raise the rate.

Choose a Reliable CD Product

Certificates of deposit are one of the most reliable investment and savings products that financial institutions offer their customers. CDs with locked-in rates require little work on your part once you invest your money. You simply need to wait for them to accrue interest and reach maturity. Our consumer reviews can help you locate the best current CD products available today!